SYNDICATE IN FIAT SALE FACES LOSS

By FRED R. BLEAKLEY

Published: September 30, 1986

Investment bankers participating in one of the largest offerings of equity securities ever undertaken in the world's capital markets said yesterday they expect their underwriting syndicate to suffer losses of between $100 million to $200 million on the deal. The offering is of $2.1 billion worth of shares in Fiat S.p.A. They are part of the stake in the Italian automobile maker sold by Libya last week and purchased by the Agnelli family and the underwriting group.

Blaming each other for what could turn out to be one of the worst underwriting losses ever seen in the Euromarkets are Deutsche Bank Capital Markets Ltd., the lead underwriter of the group, and a number of its syndicate members. The deal was expected to test the emerging market for Euroequities - securities sold outside a company's home market.

''The members of the syndicate that are dissatisfied have wounds which are self-inflicted,'' said Ronald Lemke, director of the London capital markets arm of the large West German bank. He said some of the underwriters lost patience in placing the shares once they ran into initial resistance from large investors, choosing instead to sell them at a loss on the Milan stock exchange.

''That's not what was intended. No one seriously should have expected an offering of this size would be sold within two days,'' Mr. Lemke said. The Deutsche Bank also had hoped to develop a separate dollar market for the securities so they would not depress the price of Fiat stock in Italy.

For their part, syndicate members are complaining because they had no chance to pre-sell the issues and find an appropriate offering price before they had to sign up as underwriters. That was partly because of the Libyan Government's insistence on secrecy and also because the Deutsche Bank went along with the requirement, they said.

Referring to the 100 or so firms in the underwriting syndicate, the head trader at one of them said, ''Here people were lumbered with from $20 million to $100 million of equities but had no capacity to develop pre-interest.''

Underwriters went along with the deal, said Kurt Marthaler, a managing director of Quadrex Securities, because ''they were afraid to turn Deutsche Bank down.'' Recently most of the underwriting group, which represents a virtual who's who of international finance, had participated in a highly successful $1.5 billion offering of newly issued securities for parts of the Flick Group that had been bought by the Deutsche Bank. Quadrex was not a syndicate member of the Fiat deal but was taking orders for its customers.

The Deutsche Bank also came in for criticism for having lined up interest in the Fiat securities for itself before it invited other underwriters into the deal. Mr. Lemke confirmed that all of its $600 million commitment had either been sold to investors or, as originally planned, to members of a second underwriting group. While lining up buyers is customary for a lead manager in the Eurobond market, ''obviously a $2 billion equity offering should have been done together,'' said Mr. Marthaler.

The three types of equity securities offered were trading on the Milan stock exchange last Tuesday at prices that were about 4 percent higher than what the underwriters paid. That cushion, however, plus the 4 percent or so of underwriting commissions that were deducted from the amount paid to Libya, will not offset the losses when the shares are finally placed, according to underwriters.

The managing director of one firm said that to attract interest he was offering a two-way market so investors could buy and sell. Even though the selling price on Fiat's preferred stock was $6.35, or 45 cents below the underwriting price, there ''is no interest at all,'' he said.

''The only interest,'' he added, ''is from other members of the syndicate selling into our bid.'' His firm expects to lose about 10 percent of the money it pledged in the underwriting, he said, but it is difficult to assess because ''altogether there are more than $1 billion of securities sloshing around without a home right now.''

Investors seemed reluctant to step forward, underwriters said, because so large an amount of securities could eventually depress the stock price.

Mr. Lemke said delivery of the securities would not be a problem. The allotments to underwriters were being drawn up yesterday, he said, and nothing has changed in the outlook for Fiat's business to warrant a decline in the price of the shares. The underwritten shares could be placed with new investors if members of the syndicate ''would stop selling their shares into the market so they could recover,'' he added.

In response to criticism that the Deutsche Bank had lined up buyers of shares who typically are customers of some of the syndicate members, Mr. Lemke said: ''There is no such thing as a virgin customer anymore. There is an investment community at large. Yes, we contacted Japanese insurance companies, just as American firms contact Siemens's pension fund and British firms contact Scandinavian institutions.''